Electric vehicles could see increased demand going forward in the United States thanks to higher gas prices and newer lower-cost models coming soon. EVs could also get back in the spotlight if Democrats win next week’s midterm elections to win back control of Congress and pass legislation to bring back federal tax credits.
While EV federal tax credits would benefit electric vehicle companies like Tesla Inc. (NASDAQ:TSLA), CEO Elon Musk is helping the Republican Party this election.
EV Tax Credit Comeback
Don’t call it a comeback, but new legislation from Reps. Mike Levin (D-Calif.) and Sean Casten (D-Ill.) seeks to bring back federal EV tax credits of $7,500 for new vehicles, a credit that expired last year.
The legislation has the backing of at least 160 House Democrats and could gain further support if the Democratic Party wins back the majority, according to Politico.
The proposed Cheap Energy Act would bring back the tax credits that were part of the Inflation Reduction Act enacted in 2022. Along with the tax credit, the bill has proposals to modernize the electricity grid to help make sure consumers don’t have to pay for data center upgrades, according to InsideEVs.
Not all Democrats are on board with the legislation. Some see supporting the bill as a liability ahead of the election, while others think that the credits appeal to the wrong people: wealthy coastal elites. One way around this would be to put income level caps on the credits and apply it to working and middle-class families, according to the report.
Passing legislation would also require the signature of President Donald Trump or face the need to override a veto that would require two-thirds majority from the House and Senate, more than a potential majority the Democratic Party would have in each chamber.
A record 1.3 million new EVs were sold in 2024 in the United States, the last full year the tax credit was available to new buyers. EV companies would likely welcome back the tax credits that could bring their vehicle prices more in line with traditional automotives and also help companies achieve profitability.
Ford Motor (NYSE:F), General Motors (NYSE:GM) and others have launched EVs and not been able to make them profitable, a situation made worse after the tax credit disappeared.”
Read Also: Elon Musk Is ‘Okay With Being Disliked’ — and He Knows Exactly Where His $985 Billion Fortune Is Going
Going against Tesla
Tesla has been a leader in EVs in the United States and benefited from the tax credit for years. Nowadays, the tax credit could help Tesla less than its competitors. Tesla already makes profitable vehicles and has some of the lowest starting costs for EVs compared with traditional automotives.
Musk even supported the ending of the federal EV tax credit previously, saying it would help Tesla by having it gone more than it helps the company by having it.
This could help ease the mind of Tesla shareholders.
While a Democratic majority in congress could benefit the EV sector and Tesla, Musk is putting his money directly to support the opposite happening.
Musk has donated $366 million to the Republican Party and GOP candidates for the midterms, according to media reports..
In 2024, Musk donated around $250 million to Trump and the Republican Party. He is now one of the largest donors in the 2024 and 2026 elections.
A Trump win helped boost Musk’s presence in politics, got him a position in the Department of Government Efficiency and has helped him navigate potential regulation across several industries. Musk was also able to get a NASA director who loves his SpaceX(NASDAQ:SPCX) company.
A Republicans win in the midterms would likely end any talk of bringing the EV tax credit back, as there is not as much support among that party.
A true Tesla investor and fan likely would rather have the tax credit back to sell as many Tesla vehicles as possible.
Musk would rather take the hit on vehicle sales to make sure he keeps his personal political power.
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